Use a Reverse Mortgage to Fund Retirement
By Jim Doyle ~
According to author Wade Pfau, Ph.D., CFA in article in Retirement Researcher, financial planning research has shown that coordinated use of a reverse mortgage starting earlier in retirement outperforms waiting to open a reverse mortgage as a last resort option once all else has failed.
Reverse mortgages have transitioned from a last resort to a retirement income tool that can be incorporated as part of an overall efficient retirement income plan. Two benefits give opening a reverse mortgage earlier in retirement the potential to improve retirement outcomes, even after accounting for loan costs.
First, coordinating retirement spending from a reverse mortgage reduces strain on the investment portfolio, which helps manage the risk of having to sell assets at a loss after market downturns. Reverse mortgages can help sidestep this risk by providing an alternative source of retirement spending after market declines, creating more opportunity for the portfolio to recover.
The second potential benefit of opening the reverse mortgage early—especially when interest rates are low—is that the principal limit (the overall eligible amount consisting of any loan balance and remaining line of credit) that you can borrow from will continue to grow throughout retirement.
To qualify for a government insured reverse mortgage, at least one homeowner must be 62. The home must be your primary residence and you should have between 40 – 60 % equity. Yours may be a single-family home, an FHA approved condo, a townhome, manufactured home, modular home, or a hobby farm up to 25-acres. It is a non-recourse loan, so you will never owe more than the home is worth, and no debt is passed on to your heirs or estate.
You are the only one who owns your home with its equity, the bank or lender does not. The reverse mortgage is not repaid until the last borrower leaves the home. Contact your local Reverse Mortgage Specialist for details specific to your situation.
Jim Doyle is the VP of Lending and a Reverse Mortgage Specialist at Silver Leaf Mortgage in Centennial, CO. Direct: 303-875-5994 JimDoyle@SilverLeafMortgages.com | NMLS# 1394377
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